Ready For Retirement
Ready For Retirement
You Need to Retire Early - Here's Why
There’s really only one way to reach the level of success most people say they want, and it’s not about working until 65. It’s about having a plan to retire early. Not as a finish line, but as a mindset.
Early retirement means your money is working for you, giving you the ability to choose how you spend your time instead of waiting for an arbitrary age when you’re “supposed” to stop working. In this video, James walks through a real case study to show how this mindset changes everything — from cash flow and withdrawal rates to how much of life you actually get to enjoy while your health and energy are still there.
Watch as James breaks down how retirement cash flows work, how living expenses, healthcare, goals, and taxes all interact, and how much needs to come from a portfolio each year to support the life you want. The numbers tell a powerful story: staying on the traditional path leads to dying with far more money than needed, while retiring earlier trades excess dollars for time, freedom, and experiences.
The truth is not that you should quit working, it’s that everyone should know when they could. When you understand your early retirement number, work becomes optional, saving eventually stops being necessary, and money can start being used for living, not just growing.
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Advisory services are offered through Root Financial Partners, LLC, an SEC-registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult an investment, tax or legal professional regarding your specific situation.
The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.
Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements
Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.
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There's really only one way for you to reach the level of success I know you want for yourself. And that's to retire early. Now hear me out. I would love for you to push back. I would love for you to say, no, James, I love my job. I have no plans to retire early. And that's the problem. You have no plans. In order to reach the level of success you want for yourself, you have to have a plan. You have to retire early. Now, retiring early does not mean you get out of the game. You can retire early and still keep doing what you love. But early retirement is a mindset, it's not a destination. So in today's video, I'm going to walk you through how you can approach life in this way. And I'm going to show you what opportunities open up when you retire early. To show you what it looks like when you retire early, we're going to walk through a case study. This case study is Brad and Vicky, their sample clients that I'm going to use to illustrate this. None of this is intended to be advice. This is simply using them as a case study, as a starting point to illustrate what can happen when you do things right. Now, as you look at their numbers, if your numbers are different, that's not the point. Whether you have more money or less money, what I want to walk you through is a framework all of you should be going through in order to retire early. So here's Brad, here's Vicky. Today they're both 55 years old. You can see their portfolio today between 401ks, joint accounts, Roth IRAs, rollover IRAs. They have about$2.3 million today. What I want to focus on is our goals. My guess is most of you, when you think about when do you want to retire, 65 is probably an age that comes up for a lot of people. Why? Well, that's what you're supposed to do. That's when Medicare starts. That's when you have not a full social security benefit, but a social security benefit that's fairly solid. You're a few years into that record. That seems like a nice round number. So one of the themes here is we're going to put aside the supposed to and we're going to walk through what you should be doing based upon your specific plan. That's what they should be doing. This is what I think they're supposed to be doing. Retire at 65. When they retire, we went through a worksheet or we went through an exercise of what do you want life to look like? You want to retire and be bored to death. You want to retire and have the means to do what you want to do. So to them, this is$9,500 per month of living expenses. On top of that, we're factoring in other expenses, whether that's healthcare, whether that's travel, whether that's charitable giving, supporting the daughter's wedding, car purchases every 10 years or so. We made this specific to them. Your numbers might be more, your numbers might be less. In fact, if you want to go through this very same exercise with us using your specific numbers, you can get access. Link below, the Retirement Planning Academy gives you access to the software. You can do this with your numbers. But as we go through here, we wanted to project out what might this look like. Well, Brad will have his social security. Vicky will have her social security. They both clicked at 67. Here's their salaries today. But what we want to see is once we also see how much they're saving, so they're both saving 10% to their 401ks, and they're saving$1,500 per month to their joint account. The main thing that we want to see here is we want to understand how soon could they retire? What does early retirement look like? Because as I'll show you, that changes everything about their actual plan. So here's where we're now starting for Brad and for Vicky. We're looking at their retirement cash flows. The retirement cash flows becomes the lifeblood of everything else we're going to do. Before we talk to them about investment strategy, about tax strategy, about preparedness to retire. This is the foundation of everything. So tons of numbers on this graph, on this chart, but I'm going to walk you through what each is showing us. In the income flows section, this is showing us what income flows do you have coming in. During their working years, it's going to be things like salary and bonus. During their retirement years, it's going to be things like Social Security, pension, annuities. So we want to understand what non-portfolio income sources will they have first. Well, for the first decade or so, they're going to have their salary. Their salary to be conservative, we're assuming no inflation adjustment. So you can see that for Brad and for Vicky here. Of course, at age 65, that goes away because they retire. That doesn't mean all income goes away. It means their salary goes away. They'll then have two years of no income, and then Social Security will kick in the following year. Social Security, if they both collect at age 67, their full retirement ages, this is another income source that will help them meet their needs in retirement. So that's their income flows. Next, though, we want to compare that to their expenses or their outflows. If I fast forward to 2035, the year that they retire, what we want to do is get a breakdown between what are living expenses expected to be at this time and other expenses on top of that. So living expenses, this is the$9,500 per month in today's dollars, but adjusted for inflation. Inflation is going to continue going up, which means when you talk about any number today, say a million dollars in your portfolio today, well, that could go far today, but how far is that going to go in 10 years after inflation's continue to drive the costs of everything higher and higher? Whether that's a million dollars,$500,000,$5 million, doesn't matter. Same principle applies. Inflation is going to make the cost of everything continue to go up. That's why we need to inflate their retirement expenses to ensure their cost of living increases with that. Now, in addition to living expenses, they also have healthcare. You can see Brad's healthcare, you can see Vicky's healthcare. We're factoring in each of those as well. And then on top of that, they have their goals. So with goals, this has the tendency to create some lumpy cash flow planning. Because as you can see, there's some years where they might buy a car. There's other years where there's a wedding to support. There's vacation goals for the first 15 years of retirement, but that tends to stop because you're not traveling the same in your 80s and 90s as you are in those first years of retirement. So this is where this expense can start to become fairly lumpy, depending on what that looks like for you. And then taxes, of course. So taxes coming in will be a big part of this. You actually see zeros the first several years. That's because they've built up their joint account and they, if they wanted to, could spend money from that at a zero tax bracket. That probably won't be the actual strategy. We'll probably do things with Roth conversions and other tax strategies there. But by default, the tax payment's nothing for the first two years. But you can see what that starts to increase to over time. So the total outflows here, this is telling the story of Brad and Vicky. How much total do you need coming in? So we can pay taxes, we can fund your goals, travel, wedding, car purchase, et cetera. We can fund healthcare, and then we can have enough to meet the equivalent of$9,500 per month in today's dollars to ensure your lifestyle can continue. So that's what we're looking at here. And really what we're trying to get to amongst all of this is what is this number right here? What does net flows look like? Net flows is us saying what's the difference between what's coming in in income, so in this case, social security in their retirement years, and what they actually want to spend. The net flow, the delta there, the difference there, that tells us, Brad, Vicky, here's the amount we need to be prepared to take from your portfolio so we can support all of your needs throughout retirement. So that's step number one. Step number two is saying, great, but is this a good number or is this a bad number? If I throw out a number like 214,000, 215,000, is that good or is that bad? Well, it depends. And it depends upon how big of a portfolio you have to pull that from. If your portfolio is only$215,000, that's a really bad number. You're going to spend that down in 12 months and be completely without any liquid reserves for the remainder of your retirement. Versus if you have several million dollars in your retirement, well, at some point that number becomes a very small percentage of the total portfolio that we have. So that's the next step that we want to look at. For Brad and for Vicky, we want to understand what this represents as a percentage? As a reminder, as I'm going to this next page, you can get the same software. The link is in the Retirement Planning Academy below. If you purchase that, it comes with access to the software so that you can run your same projections and look at this with your specific numbers. So if we look here, if we look at withdrawal rate of this plan, what we can see is year one, the withdrawal rate is about 5.25%, but then that starts to decrease. It decreases to mid-threes and then it even decreases below 2%. Why does that happen? Well, it decreases because after a couple of years, Social Security kicks in. When Social Security kicks in, if you have their total expenses, now some of that's covered by Social Security, it's a smaller portion that must be covered by their portfolio, which means their withdrawal rate from that portfolio starts to decrease. You see how it's not totally consistent. Some of these lumpier years, maybe they're funding a wedding, maybe they're buying a car, maybe there's a bigger one-time purchase. That's the reason for that. But this increase right here, this jump from 2% to about 3.5%, that's simply because required distributions have kicked in at that time. So this starts to tell you a story. This tells you a story of how much do you need to pull from your portfolio each year, not just numbers on a page, but connecting that to real life because this enables the wedding fund, because this enables the lifestyle, because this enables the car purchase. So we start to get that sense for Brad and for Vicky. Now, the final step here is this is saying if you start today at about 2.3 million, and Brad and Vicky, if you continue to work until age 65, you might have somewhere closer to five or six million in your portfolio at that time. Again, don't get too hung up on these numbers. If your numbers are more or less, it doesn't matter. This is just the framework to apply. You can apply the framework with your specific numbers if you have a software like this on your end, or even if you build a spreadsheet on your end. Now, what I would show Brad and Vicky is your portfolio is projected to continue grow so much so that you're projected to at age 90 have almost 20 million dollars in your portfolio. So what did I say at the very beginning? I said for you to reach the level of success that you want to reach, you have to retire early. Let me reframe that. This is not success. Dying with$20 million is not success unless you intentionally set out with that as your goal. What is real success? Real success is using your money and turning that into more freedom. Using your money and turning that into more time, using your money and turning that into more experiences that align with what you actually care about and what you actually value. What does that practically mean is don't be on this normal path. Don't be on this normal path that I'm retiring at 65 because I'm supposed to. If you want to do that, wonderful. But what I want to do for you is help you understand when you could retire early. So, Brad and Vicky, if you don't want to die with$20 million at age 95 plus all the equity in your home, what does early retirement look like? What if we start toggling some of these variables here and they don't retire at 65, but instead they retire at 62? What's going to change here? Now we know the projection is not going to be as good. Of course, there's fewer years of saving and working and growing, but the question is, can you do it? Because the goal is not to die with$20 million. The goal is to get the most out of your life with your money. So what you see here is Brad, Vicky, there's fewer dollars in your portfolio if you retire three years earlier. But how do you quantify the value of those three years? How do you quantify three more years of full health, full vitality, full freedom to do the things that you want to do? Because I'm going to tell you right now, the ages of 62 to 65 are going to be a whole heck of a lot more fun than ages 72 to 75 or ages 82 to 85. The older you get, yes, you're still living, but you don't have the same health. You don't have the same vitality. You don't have the same people around you who over time start to drift away. Maybe they start to pass away. Maybe you lose some of those friendships that you have. So what's the value of having those three years to do whatever you want to do? Now, why 62? Well, that's just a starting point. The real goal of planning, the real goal of getting to retire early is to see when you could possibly do it. So what if we kept sliding that to age 60? If this was age 60, you can start to see the proposed plan or the new plan, instead of passing with$20 million, you pass with closer to$10 or$11 million. Now we also want to be monitoring the probability of success here. So this is just one factor. The linear projection is just one side of this. The other side of this is what's the probability of success, which takes into account things like sequence of return risk, which takes into account things like we can't guarantee this rate of return, we can't guarantee this level of inflation, we can't guarantee this longevity. So when you run a Monte Carlo simulation, it factors all that in to say what's the percentage likelihood or probability that this actually happens. But as you start doing this, what you can look at for Brad and for Vicky is look, your early retirement number might be more like 60. Why does that matter? Well, Brad Vicky, once you turn 60, you're 55 today. Once you turn 60, at a minimum, I want you to stop saving more for retirement. Stop using your money to buy more money and to buy more time in the future. Start using your money to do things today. You've hit retirement. You are retired. And again, if we shift retirement from being a destination to a mindset, at age 60, you're there. We're looking at the projections. So if you want to stop, if you want to get out of the game, get out of the game. If you want to keep working because you love what you do for work, keep working and loving it. But stop saving for retirement. You're there. Spend that money, give that money, do more with that money because you don't need any more to fund that future lifestyle that you want to have. It's already funded. Start using that money today. Now, the real cool thing about this is this is all based on assumptions. Sometimes people look at this and the taste of early retirement is intoxicating. The taste of freedom is intoxicating, saying, wow, I could do all this. I don't have to work until 65. I can do it at 60. Well, could I do at 58? Could I do it at 56? And we start looking at this and saying, yeah, we could do that. We could plug in, let's say, 56 here to say, is this possible? But here's the thing. On a linear projection, it might show that you're able to do this just barely. But what concerns me is your probability of success isn't very high. What that means if there's a major market downturn, you have a good chance of not having enough money to last until the age of 90. Now, what are some other things that you can do? This isn't binary. This isn't just one lever you can pull and that lever being your retirement date. You can also start looking at what would change if you took out some of your living expenses. So this is where it becomes very personal. This is a plan that's unique to you. But when you start to explore it this way, you can start to see how some of these variables, all these variables, tie into one another. Now all of a sudden, that probability of success that was 43% if they spend$9,500 per month is now 73% if they spend$7,500 per month. So what's right for Brad and Vicky is not going to be right for you. The point I want to make though is if you want all that life has to offer, you have to retire early. If you want to keep working because you love the game, then great, please stay in the game. But have a plan to retire early. Have a plan where you know when you could leave if you want to leave, so that you can do the things with your money that give you the most life, as opposed to just using your money to continually making and growing more money without any plan to actually use it.
